A fundamental question asked by every business owner is “How much should I be spending on marketing and advertising?” The answer is of course: It Depends. If you are talking to an advertising agency, then you have already recognized the need for an expert evaluation of the opportunity/cost balance of advertising within your specific context. In this blog we are going to look at some of the guidelines Media Link uses to make recommendations with regards to that top line figure.
A few notes first:
- We do consulting. Just because we could handle everything, does not mean that it is a good idea. The business owner or internal Marketing Director always establishes the budget.
- Media Link operates without a retainer. So, we are hired project by project. We do this so we can continue to work with businesses of all sizes.
One method of calculating your budget is contained in the table below (Taken from Effective Marketing by Peter Hingston). We like this example, because this exercise in determining your budget is focused on your situation at this particular point in time. With this exercise, start with a typical annual marketing budgetary figure of five percent of total revenue. Then for each factor, add or subtract percentage points depending on your own situation. At the end, you will have a percentage of your revenue to use toward marketing your business.
This method of tailoring a budget to your needs is purely a guide to give you an indication of the sort of factors you might consider. Your final decisions should be interpreted in light of your own circumstances. For example, you might say it has been a bad year because of the pandemic I better spend less on advertising to make up for it. If this move is essential to keeping you solvent, then this move might make sense. Overall, the reason we market or advertise is to remind and let people who need your product or service know you are an option. The more people hear about your business, the more likely they are to buy from you when the need for your product or services arises. Advertising less means less people will be reminded you are an option. Remember, when people have a need for your service or product, the first few businesses that come to mind will be the businesses they turn to for help in fulfilling their need.
If you want to do the job properly, a full analysis is the most important step. Marketing is not just advertising design, it is every time a customer, former customer or potential customer encounters anything to do with your business. Most business owners are aware of all the elements factored into a marketing analysis, but might not be actively considering them and certainly cannot be dealing with how they all fit together.